PKO Bank experts presented ten main predictions for 2024. What do they think will have the biggest impact on the economy and the economy?
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Is the global economy facing a soft landing?
As we read in the PKO BP analysis, The major central banks managed to get inflation closer to their target without increasing unemployment. In both the US and the Eurozone, unemployment is at or near record lows, despite significant tightening of monetary policy.
“We expect the Fed and ECB to start cutting interest rates in the middle of this year, and by the end of 2024 rates will be cut by a total of 75-100 bp.” An interesting structural phenomenon is the new industrial policy in Georgia. USA (and to some extent EU). It aims to decarbonize, reindustrialize, reduce dependence on China, and support economically neglected regions,” they wrote.
Is the EU financing a breakthrough for the economy?
Analysts also emphasize this Poland's political change gave hope for a relatively quick influx of EU funds from the Recovery and Resilience Facility (RRF) contingent on meeting milestones.
“Together with the RePowerEU project, which is part of the RRF, the funds potentially available to Poland currently amount to €60 billion. In particular, the RRF will help finance investments to improve energy efficiency, which are essential to meet the EU's ambitious climate goals. We expect that in 2024, the RRF funds will provide a significant inflow of EU funds with a relatively low absorption of funds related to coherent policies.“- they are writing.
What about the deficit?
PKO BP also emphasizes that Poland's fiscal situation is systematically deteriorating compared to other EU countries – From being one of the fiscal leaders post-pandemic in 2021, we quickly fell to the bottom half of the EU rate. Since the peak of the pandemic in Q21, the debt-to-GDP ratio has declined by 10.3 points, with the positive impact of high inflation (the GDP deflator reduced the ratio by 11 percent) and relatively strong real economic growth (impact: -7 percent).
“We expect it Fiscal deficit relative to GDP will remain relatively high for a long time, It is slowly declining from 5.9 percent. in 2023 to 5.6 percent in 2024 and 4.7 percent in 2025. The scope for further discretionary actions in the area of fiscal policy is significantly limited. Russia's aggression against Ukraine ended the period of the “Peace Dividend” and forced an increase in military spending. “The energy crisis/energy transformation is also putting a serious burden on Polish public finances,” analysts say.
Will there be a shortage of workers in Poland?
This is also emphasized Poland's labor market was resilient to an economic slowdown in 2022-2023, and the unemployment rate remained at a record low. Nominal wage growth was in double digits and actually turned positive again in 2023 thanks to a sharp fall in inflation. A generous increase in the minimum wage in 2024 would keep total wage growth in the double digits.
“The demand for labor is limited, but it should increase with the expected economic recovery in 2024. However, the extent of employment growth is limited by supply shortages associated with a declining working-age population. which is only partially offset by favorable net migration and potentially higher female labor force participation rates,” they write.
Are we expecting GDP growth?
The bank's experts point out that the solid GDP growth in 2h23 is only a sign of an even stronger recovery in the previous quarter.
“We predict that In 2024, the growth of the gross domestic product will reach 4%.. Household consumption will be the most important driver of the economic recovery, mainly due to improved real incomes (double-digit growth in wages and pensions, lower inflation, increased social transfers). Freezing RRF funds will help stimulate investment,” they wrote.
Inflation has not had the last word
Analysts also point to the latest inflation data, which supports a below-consensus CPI forecast for 2024.We estimate that CPI inflation in March-April 2024 will be around 3%. WW and will be very close to NBP's target of 2.5%,” the bank's analysis reads.
However, such a strong decline would not have been possible without a high base effect and prolonged inflationary measures. A recovery in demand will halt the disinflationary trend prematurely, and the road to achieving the NBP target permanently is still long. – we read in the analysis.
Is there room for a rate cut?
PKO BP also emphasizes that difficult for MPC elections. “The country is watching Rapid recovery of demand despite still high inflation. Abroad, the trend in 2024 will be a global shift towards lower interest rates. We assume that we are looking for the optimal form of monetary policy“Monetary Policy Council Decides to Adjust Rates Carefully” – We read in the bank's analysis.
“Strong ongoing disinflation should make room for a 25bp rate cut in March.” In turn, the global environment may encourage another such move by the Monetary Policy Council later in the year, perhaps in November. We assume that the NBP rate will be 5.25% at the end of 2024. compared to today's 5.75 percent. The risk in this scenario is indeed asymmetric – towards keeping interest rates unchanged,” PKO BP analysts wrote.
Further strengthening of the zloty
Analysts note that In 2023, the Polish zloty strengthened significantly against major currencies. The real effective exchange rate indicates a significant strengthening of all currencies in the region.
“The assessment supports the region's central banks in containing inflationary pressures by reducing import price pressures. A negative consequence of a strengthened currency is the erosion of export profitability. “According to the NBP research, the percentage of exporters with unprofitable exports is already the highest since 2011,” the economists said.
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